By midafternoon on Feb. 3, the prosecution of Martha Stewart and Peter Bacanovic had flat-lined. Four hours of direct examination, cross-examination, and re-direct examination of Merrill administrator Judy Monaghan had yielded exactly one potentially suspicious fact—the timing of Douglas Faneuil’s raise in March 2002—and the government’s case seemed headed for the morgue. Just before the gurney was wheeled away, however, prosecutor Karen Patton Seymour grabbed the defibrillator paddles and shocked the patient back to life:

“Your Honor,” she said. “The government calls Douglas Faneuil.”

Faneuil: The star witness takes a turn

Douglas Faneuil, it turns out, is a beanpole. There was no wind in the courtroom, but if there had been, his suit would have flapped. While being sworn in, he hunched over the guard like a NBA player leaning over a coach. “My knees are long,” he said, endearingly, to the judge, when explaining why he couldn’t move the witness chair closer to the microphone.

Between the defense and the media, Faneuil has been so trashed of late that expectations were low. He would have exceeded them even if they had been high. Faneuil was polite, deferential, entertaining, likable, and, dare I say it, credible (pre-cross-examination, of course). The interplay between him and Seymour, moreover, was masterful: Standing at the lectern, 15 feet in front of Faneuil, Seymour looked like a stern mother helping rehabilitate her formerly wayward son.

Did there come a time at Merrill Lynch when you did something illegal? Karen Patton Seymour asked.

“Yes,” said Douglas Faneuil.

What did you do? asked Seymour.

“I told one client what another client was doing and then lied about it to cover it up,” said Faneuil.

The getting-to-know-you sequence was beautifully choreographed. Faneuil confessed to an “inaccuracy” on the résumé he gave Merrill Lynch when he applied for his job: He said his grade point average was 3.5 when in fact it was 3.44. He described Peter Bacanovic as the “best boss I ever had … demanding yet appreciative”—an ideal, credibility-enhancing prelude to accusing Bacanovic of a felony. Unsure whether he could repeat what one of Sam Waksal’s daughters had said when she had learned that ImClone was already trading down on the morning of Dec. 27, 2001, Faneuil asked the judge if it was OK if he swore in court.

Seymour and Faneuil worked together for more than an hour, gradually building toward the cathartic crescendo of the first moment of truth (or lie, depending on one’s perspective). Faneuil described his call with Aliza Waksal on the morning of Dec. 27, 2001, in which she placed an order to sell nearly 40,000 ImClone shares. He described the calls from Waksal’s other daughter, Elana, who soon dumped her own shares. He described the calls and faxes from Sam Waksal’s accountant, who demanded that Faneuil “ignore all other business” and get Waksal’s ImClone shares transferred and sold. Then, finally, he described the call with Peter Bacanovic just after 10 a.m., in which Bacanovic asked him to call Martha Stewart.

We talked initially about [Sam Waksal’s accountant] being so pushy, Faneuil began. Peter was trying to calm my nerves, saying [the accountant] was always like that. Then we talked about the morning’s events. Suddenly, Peter said, “Oh my God, get Martha on the phone.”

Initially, this transition struck me as odd, almost as if Faneuil had dropped a line. The “suddenly-Peter-said-oh-my-God” phrase seemed to come out of nowhere: Faneuil and Bacanovic had already spoken that morning—when Faneuil informed Waksal’s accountant that he couldn’t sell Waksal’s shares, the accountant reportedly said, “Do me a favor, just ask Peter”—so I couldn’t imagine what Faneuil might have told Bacanovic now that so startled him. Then I thought of a context in which the remark might have made sense: “Oh my God, I just remembered, Martha owns this thing. Get her on the phone. …”

I called Martha Stewart, Faneuil continued, and her administrative assistant—Ann Armstrong, I believe—answered. It wasn’t a conversation I listened to carefully. Peter did all of the talking. I remember hearing that Martha was on a plane, but that’s really all I remember.

Faneuil’s saying he did not remember this conversation helps his credibility—if he is simply selling out to the government, he might as well really sell out—but it will hurt the prosecution’s ability to prove that Bacanovic lied about the message he left for Stewart (now there is only one witness: Ann Armstrong).

Peter called me back after that. He said, “Listen, Martha’s going to call. You’ve got to tell her what’s going on.” I said, can I tell her about Sam? He said, “Of course. You must. That’s the whole point.”

This, of course, is the money shot. The first part is ambiguous: “You’ve got to tell her what’s going on” might mean “You’ve got to tell her about the high volume, price decline, rumors that Erbitux will be rejected, etc.” The second part, however, isn’t.

Given Faneuil’s demeanor, the vitriolic cross-examination that Peter Bacanovic’s attorneys have been building up to for the last week might backfire: Attacking him might seem as mean and unfair as attacking the very pregnant Emily Perret would have. Bob Morvillo’s approach—a good kid, who, on the morning of Dec. 27, 2001, was in way over his head—will probably be more effective. Still, in two days, after the cross-examination, I imagine that so little will be left of Douglas Faneuil’s carcass that even the vultures will give up and fly away. Today, however, he and Karen Seymour had the stage to themselves, and they put on a great show.